DraftKings (DKNG) faces a positive catalyst path from the FIFA World Cup driving incremental wagers during a low period over the next few months, Morgan Stanley said in a research note emailed Thursday.
Morgan Stanley said it is now forecasting DraftKings Q2 and Q3 handle growth of about 8% and 6%, respectively, versus 5% and 6% previously, to reflect a better than expected April and the World Cup coming in June. Fiscal 2026 and 2027 handle growth is pegged at 6% and 5%, respectively.
Investments in prediction markets may dampen fiscal 2026, but could set the stage for greater flow-through, Morgan Stanley said, adding that US states appear to be finally seeing some progress on iGaming legislation, which is not embedded in the company's stock.
Morgan Stanley said its 2026 earnings before interest, taxes, depreciation, and amortization estimate moves to $767 million from $791 million, below the mid-point of the company's guidance range, as DraftKings is expected to spend towards the higher end of its $200 million to $300 million estimated spend range.
Morgan Stanley lowered its price target to $39 from $40 and maintained its overweight rating.
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